W-2 Form

• Employers are required to issue a W-2 to all employees, regardless of the amount paid to a person. A W-2 form lists a taxpayer's personal information, employer tax ID, total compensation paid to the employee from the employer and various tax withholdings such as income, Social Security and Medicare. You will use this information to complete your tax return.
  
  

Wages Under $600

• The Internal Revenue Service (IRS) reports that it's a common misconception that employees don't need to file a tax return or pay taxes on wages under $600. However, there is no minimum amount that can be excluded from gross income on a tax return. Federal income tax, Social Security, Medicare and state taxes, if applicable, will be deducted from your wages if paid by an employer. If you are an independent contractor, these taxes will not be automaticlly be deducted.
  
  

Form 1099-MISC

• People who perform a service, such as consulting, for a client but are not employed by the company, must receive an accounting of any income from the client on Form 1099-MISC. The IRS classifies these people as independent contractors. Clients may optionally provide independent contractors with a Form 1099-MISC for services worth $600 or less. Taxes are not deducted from these earnings. Instead, independent contractors are responsible for paying these taxes before the April 15th tax filing deadline.
  
  

W-2 Tax Breaks

• Tax payers earning less than $600 in wages per year with dependent children may be eligible for a tax refund that offsets any tax obligations. If you paid federal taxes you may qualify for an Earned Income Tax Credit of up to $5,751 at the time of publication, depending on the number of qualifying dependent children you have. In addition, the IRS offers clergy and religious workers exemptions from Social Security and Medicare taxes which must be declared on the W-2 form.